ITC panel discussion at Ninth WTO Ministerial Conference

This session brought together public and private-sector representatives to explore through concrete examples and best practices what governments and trade support institutions can do to support the private sector, and particularly SMEs, in integrating into and moving up value chains.

The growing importance of regional and global value chains in international trade provides a unique opportunity to increase SME exports through their integration into these value chains. SMEs that play a key role in poverty reduction, income generation and job creation in developing countries can now engage in global trade flows without the need to be competent in all aspects of the production of a final output. Developing countries can thus move towards industrialization through vertical specialization in a narrowly defined segment of activities.

However, the fragmentation that lies at the core of global value chains requires goods to cross borders several times during the production stage. Therefore, a country where inputs can be imported and exported within a quick and reliable time-frame is a more attractive destination to foreign investors looking to build value chains. As such, trade-facilitation measures are crucial to fostering participation in global production networks and global markets, particularly for landlocked countries. As WTO Member States work towards the conclusion of a multilateral Trade Facilitation Agreement at the Ninth WTO Ministerial Conference (MC9) in Bali, the agreement is expected to create new opportunities for developing and least developed countries (LDCs).

Developing-country SMEs particularly affected by non-tariff measures

Developing-country SMEs often have to bear inordinately high costs of complying with customs and border procedures and other non-tariff measures (NTMs), rendering them uncompetitive as suppliers and impeding them from integrating into regional and global value chains. The impact of NTMs is especially significant for companies exporting from landlocked developing countries (LLDCs). NTMs can prove to be a major obstacle to local, regional and global trade in both goods and services as companies struggle to comply with an increasingly complex web of policies and, at times, opaque technical standards. Since dealing with NTMs represents fixed costs to businesses, they have a larger relative impact on SMEs.

More technical assistance needed to overcome trade barriers

There is a strong need for technical assistance to address the business implications of NTMs not only in goods but also in services to improve overall competitiveness. Most barriers to trade in services relate to the way governments regulate services domestically. Trade in services accounts for more than half of total trade of some developing countries if services content embodied in goods, such as telecommunications and transport, is factored in. Reforms in these areas would have positive implications for the development of trade in goods as well as other services, especially tourism, where multiple forward and backward linkages to productive sectors underscore the sector’s high potential for inclusive growth.

ITC support for SMEs to facilitate their integration into value chains

ITC, the joint agency of the United Nations and the World Trade Organization, assists SMEs in developing and transition economies in their efforts to integrate into regional and global value chains. As the advocate for SMEs among international organizations, ITC recognizes the constraints faced by small businesses in joining value chains. ITC works with policymakers and trade support institutions to promote trade policies and regulations that create an SME-friendly business environment.